There were 15,394 individual insolvencies in England and Wales in the second quarter of this year, according to figures from the Department of Trade and Industry.

This is nearly 37 per cent up on the same period last year. They included 11,195 bankruptcies and 4,199 individual voluntary arrangements (IVAs) - nearly 70 per cent more than before.

Mark Sands, director of the insolvency practice at KPMG, said: "This is a sign that the UK's demon debt is showing its ugly head. This indicates that the billions of pounds worth of consumer debt that is building up through loans and credit cards is, in numerous cases, getting out of control."

There have recently been a few high-profile bankruptcies too, proving that no one is necessarily immune. Yachtswoman Tracy Edwards, 43, who led the first all-female round-the-world crew, was made bankrupt just last month with debts of more than £8m.

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HM Revenue & Customs is thought to bankrupt more people than any other single organisation. Yet around 70 per cent of bankruptcies are self-instigated, Mr Sands said.

If you were to find yourself in such serious financial difficulty that you would consider bankruptcy, you should examine all the options first. In addition to going for broke, you also have the option of an IVA. Mr Sands said: "Bankruptcy is very prescriptive legislation, and your affairs are dealt with with no regard to your views.

"An IVA is very flexible, and allows you to go to the auditors with ideas about how to solve your problems. Even the length of the voluntary agreement is decided between the two parties."

However, by taking the IVA route, you will not have your debts written off in the same way as a bankruptcy, said Mike Gerrard, a specialist in personal insolvency at Grant Thornton. You may find that half of the debt is written off, but you would be expected to pay off some of the remaining debt each month.

In general, interest on unsecured loans will not continue to roll up, but mortgage interest will accrue, Mr Gerrard said. But this can depend on the assets you have relative to the amount you owe.

He added: "An IVA is an increasingly popular way of dealing with this. It is a more debtor-friendly way of dealing with your difficulties."

In either case, you should not expect your financial position to be back to normal as soon as your bankruptcy is discharged, or your IVA completed. Credit reference agencies, which are the source of information for financial institutions considering whether or not to lend you money, will keep details on file for up to six years.

Mr Gerrard said: "You can't get credit above £500 without declaring that you are an undischarged bankrupt. Credit reference is really going to be the common problem that most people have."

It has been made easier to go bankrupt since the Enterprise Act 2004 enabled bankrupts to be discharged more quickly, often within a year, said Mr Sands: "You can even prepare your own petition for bankruptcy online. You can prepare the documents, and if you go to a court and they make the order, there is a bar code on the paperwork that will be read, and it will automatically go into their file."

This can be accessed via the Insolvency Service website at www.insolvency.gov.uk, which will also outline a range of extra information.

However, any students thinking that bankruptcy would be a simple, relatively painless way to resolve the debts they run up at university should think again.

Thanks to changes implemented about a year ago, debts with the Student Loan Company are no longer written off by bankruptcy. So for many graduates, bankruptcy would be futile, unless they had specifically targeted high street lenders for their loans, Mr Sands said.

Mr Sands and Mr Gerrard said that, although they had heard anecdotally that students had increasingly used bankruptcy to clear their debts, they had not seen an increase. Mr Gerrard said: "But there are lots of people in their 20s and 30s in financial difficulty."

Aside from the stigma attached to bankruptcy and insolvency, although it is less problematic than it was, there are a number of jobs that you are excluded from doing if you have been made bankrupt in the past.

You cannot become a director of a limited company, and you would find it hard, if not impossible, to get a job in financial services. However, Mr Gerrard added: "You can become an MP now."

Restrictions on people made bankrupt

You cannot become a director of a limited company.

You may not be able to practise as a solicitor.

You cannot work for HM Revenue & Customs.

You cannot borrow more than £500 without telling the lender that you are an undischarged bankrupt.

You may continue to have problems obtaining loans after bankruptcy is discharged because credit reference agencies can keep details of bad debts for up to six years. However, contrary to popular belief…

You can now become an MP if you have been declared bankrupt, but only if you do not have a bankruptcy restrictions order against you.

You can still work in the financial services industry but the Financial Services Authority may prohibit you from holding positions of seniority or responsibility.